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Maybe we need a new pair of specs. But we were leisurely trolling the Internet Thursday when we spotted a headline that made us sit up and take notice. It read: "Obama and Boehner met for franks and talk," and we couldn't suppress a reflexive yelp of "Hot dog!" on the reasonable supposition they must have cut a deal that would get us past the infamous cliff that stood a mere 18 days from choking off the hesitant, nearly four-year-old recovery.

But it quickly emerged we were indulging in strictly magical thinking, and that what the headline really said was "Obama and Boehner met for a frank talk." Boehner exited the 50-minute meeting wearing a dour look that his trademark suntan couldn't hide and all by itself served as telling evidence that the only thing the two had agreed on at the powwow was to continue to disagree.

The market, which, as measured by the Standard & Poor's 500, had strung together a more than decent winning streak stretching over six sessions, turned tail. No doubt the disappointment engendered by the failure of the confab helped darken the mood among investors. But contributing as well to their about-face was the predictable tendency of Wall Street to buy in anticipation and sell on the news.

The unwitting culprit responsible for the rather abrupt and decidedly unwelcome change in sentiment from positive to negative was Ben Bernanke. Suddenly, it seemed like at least half the Street's shrinking population of portfolio pros rushed to announce they were fed up with the Fed and they directed their ire, naturally enough, at the chairman. Needless to say (forgive us, but one of the things we do best is to articulate what is needless to say), a good many of these vehement critics had been citing the likelihood of another easing move as a reason to buy in anticipation of it.

And in keeping with expectations, Bernanke & Co. lifted the curtain on the latest version of quantitative easing (we've lost count as to whether this is still No. 3 or a sneak preview of No. 4). But the monetary powers-that-be vowed to chip in $45 billion a month of stimulus in the form of Treasury securities to replace the expiring Operation Twist, along with the $40 billion a month of mortgage-backed securities they would continue to purchase. The only significant change was the ditching of the plan to keep interest rates just this side of zero until mid-2015 and, instead, pledge not to raise them until the unemployment rate fell to 6.5% (the latest official tally was 7.7%), so long as inflation wasn't threatening to top 2.5%.

As ISI Group's Roberto Perli explains, the idea was to supply a bit of reassurance that if and when the nation's monetary managers decide to tighten up, they'll do so in a measured and hopefully not disruptive fashion. Yet despite the Fed's touching demonstration of concern for their well-being and peace of mind, investors were more than a tad discombobulated. It's not entirely clear whether they were perturbed by even the distant prospect of a rate increase or had been counting on Ben to pull something new from his bag of tricks with which to goose the economy, rather than serve up the same old same old.

On the face of it, in any case, a switch to relying on thresholds, rather than calendrical, targets in guiding interest-rate policy hardly strikes us as sufficient cause to blunt a budding market rally. It could be sheer coincidence -- an odd one for sure -- that a number of long-term bearish advisors and strategists turned bullish, not rabidly so, but nonetheless unmistakably upbeat, just as equities ran out of gas.

But let's assume that investor disappointment with the Fed's action or lack of it prompted bids to be withdrawn and stocks to back off recent gains. Just imagine the reaction if the world wakes up on Jan. 1, 2013, to find all the mandated tax increases and spending cuts are in force. Yes, we're well aware that the smart money, both in the Street and D.C., insists that isn't going to happen. Which, as we've ventured before, may be the clearest indication it will.

UNDER THE MILD HEADLINE of "Negotiating the cliff," Bank of America Merrill Lynch did a neat job last week of describing why it, unlike the supposed smart money, believes the tussle between the administration and Republicans in the House over the deficit and taxes is firmly "stuck in the mud." And even more important, the report explains why investors might do well to brace themselves (and presumably their portfolios) for "a messy, market-unfriendly outcome" of the epic struggle over the cliff.

At first glance, the firm opines, the gap between Boehner and Obama does not appear to be too large. But that's deceptive and on closer scrutiny, indeed, it turns out to be quite formidable. Boehner is offering to dig up $800 billion in revenue by eliminating tax loopholes, but hasn't revealed any details as to which current loopholes would be closed. We can only assume his shyness in this regard springs from a preference to delay as long as possible being specific, lest he incur the wrath of his fellow Republicans, as well as potshots from the Democrats.

Among the likely restraints to implementing his proposal, Merrill cites the fact that a host of his GOP colleagues will strongly resist taxing investment income at ordinary rates, while the Dems are apt to be just as staunch in resisting tax-break reductions for low-income families. Members of both parties include more than a few dissenters to the very notion of including state and local taxes as part of income on the grounds of double taxation, as well as objecting to levying taxes on health-care benefits that are not cash income to a household.

The Merrill analysis points out that one way to get around what could be quite painful choices on what to tax and what not to tax might be to put a cap on overall reductions and let the taxpayer decide which to choose. The conundrum here is that, pragmatically speaking, it's particularly tough on the discretionary kinds of deductions like charitable donations, and it would especially hurt folks in states with high taxes and high housing prices, like California and New York, both of which voted heavily in favor of the president in the recent election. Besides, even if the GOP reps gave their OK to soaking the rich, it would raise only $440 billion or thereabouts -- $1 trillion less than Obama is shooting for.

Merrill posits that all such considerations likely translate into a long road ahead in addressing the budget deficit and that the first step will help determine the path forward in that treacherous endeavor. Not to be overlooked either, the firm suggests, is that, with the Bush tax cuts expiring, Democrats are more or less aware that they may never have a better chance at boosting taxes on upper-income households and so can be expected to pursue that goal with relish and vigor.

Merrill also reckons that "we are entering a risky period for the markets." It has been predicting for several months that once the question of what the Fed planned to do is out of the way -- as it is now -- and worries about Europe subside a bit, as they're showing signs of doing, the focus will shift away from the central banks and onto the cliff.

Accordingly, it views last week's policy announcement by Bernanke as conceivably marking another short-term peak in the stock market, which means you can expect the poor beast to act increasingly antsy for a spell. And in the end, whenever that comes, market pressures seem destined to force a deal between the cliff combatants. Investors would do well to be prepared, rather than sorry.

WE AREN'T TRYING TO BULL Bank of America by citing it twice in one column. But worthy of a mention is a speech by Brian Moynihan, who runs the show, at the Brookings Institution in dear old Washington, D.C. Particularly interesting was his call for lenders (like his own bank) and borrowers to think over the traditional assumption that homeownership is the right solution for everyone. Implicit in the suggestion, of course, is the heretical idea that it isn't.

Allowing that the recovery in housing is "a real, sustained recovery," he still recommended what he called a reset to make sure that lenders carefully underwrite loans and ensure that borrowers have an incentive to maintain their payments. Which, as recent history attests, would be a salutary change to general practice. Moynihan also recommended that the role of government in housing should be modified, via an orderly transition spread over several years so that markets are not disrupted.

"You're going to have to give lots of warning to America, lots of warning to the market" Moynihan said. Lenders should be persuaded to "strike the right balance between prudent underwriting, responsible down payments, and access to homeownership."

If Mr. Moynihan keeps talking this way, he might find himself persona non grata when the home builders throw one of their gaudy shindigs in Las Vegas or wherever.